Per Gowri Shankar :

The appellant manufactures metal rolling mills and "galvanising lines". Rolling mills were, at the relevant time, classifiable under heading 8455.00 of the Central Excise Tariff, and galvanising lines under heading 8479.00. Relevant entries are reproduced below:

Up to 15th March, 1995 the rate of duty applicable to sub-heading 10 and sub-heading 90 in each of the heading was the same - 10%. With effect from that date, parts, classifiable under sub heading 90 became liable to a higher rate of duty. Subsequent to this date, the appellant cleared rolling mills and galvanising lines under sub-heading 10 at the lower rate of duty. Notices were issued on the basis that what was cleared was parts liable to duty @ 15% and demanding their duty. Appellant took the stand that what it contracted to supply was a complete rolling mills and galvanising lines and not a part and it was only as a result of requirement of the transport and installation having regard to the heavy weight and complex nature of the machinery that these were separately cleared. The Commissioner however was not persuaded by these and he said that for the goods to be cleared under sub-heading 10 they must consist of the complete machine at the time of clearance which was not the case and held the goods to be assessable under sub-heading 90, confirmed the demand for differential duty and imposed penalty. Hence these appeals.

2. It is contended for the appellant that it had contracted to manufacture and supply rolling mills or galvanising lines tailor made to the specification of the buyer. It requires 9 to 14 months to manufacture a complete cold rolling mill. The cold rolling mills and the galvanising mills weighted between 900 to 1500 metric tonnes, have a length of 60 to 300 metres, and a height of 5 to 12 metres. Rolling mills are composed of assemblies or sub-assemblies which are to be erected at site in a specific sequence over 8 to 9 months. Considering the sizes and nature of the mill, the time taken to manufacture and the volume of activities involved, it is not possible to manufacture and despatch the entire unit in one lot. It is contended that whenever parts for replacement of existing components were cleared, they were correctly classifiable under sub-heading 90. Rule 2 (a) of the rules for the interpretation of the tariff provides that any reference in heading to an article shall be taken to include reference to that article in unfinished or removed unassembled or disassembled. This note would apply to these goods. Note 4 to Section XVI of the tariff which provides that a machine consisting of separate components which intended to contribute together to have clearly definite intentions cover one of the headings 84, 85 falls to be classified in the heading appropriate to that function. By applying these two notes, the goods when supplied as in pursuance of the contract for complete machine has to be classified as a complete machine even when removed piece-meal.

3. The departmental representative contends that what is to be considered is state of the goods presented for removal. He says that Rule 2 (a) of the Interpretative Rules only apply to goods complete or finished removed unassembled or disassembled and hence would not apply where the goods have not yet acquired the character of complete or finished goods. He contends that Note 4 of Section XVI will only apply in those cases each of the component of the machine contribute to a function which might be different from the main function of the machine and would not apply where the dispute between the two headings relate to part of the machine or the complete machine.

4. The current Central Excise Tariff and the Customs T